Greek 2 Year Bond Yield Passes 20%

Following the S&P news, oddly enough, one is not seeing a flight to safety away from US paper and into Greek. In fact, observing the absolutely record 20% yield print on the 2 Year Greek bond, one may be excused to speculate that the inverse is happening. Also, with the cash price of the 2 Year now at 20% and the prices of longer duration bonds in the 60s, there is now no reason to actually restructure the country: bonds have it pretty much fully priced in. After all, the Santorini liquidation value should be worth at least 20-30 cents on the bond dollar, er, euro.

Also, with the cash price of the 2 Year now at 20% and the prices of longer duration bonds in the 60s, there is now no reason to actually restructure the country: bonds have it pretty much fully priced in.

There is NO WAY IN HELL Germany would talk about haircuts or restructuring in Greece unless Merkel had FINALLY been successful in forcing her banks to divest themselves of Greek SWAP exposure. If she has . . . if there are no Greek Swap holdings at German banks, then fuck the EU (she's losing elections, she has to maneuver) and let Greece default.

Oh wait, that means French banks that didn't swap divest get crushed? Angela will just shrug and offer to help France, at 8% over prime.

I saw some of the maths explained earlier for the Greek government bond which expires in 3 years time.

Where real relief comes in the shorter term is if the same system is applied to bonds which are to be renewed sooner than 2020. If we look at one of these the 4.5% bond expiring in May 2014 then Greece’s financial position in 2014 would be improved by not repaying it until 2020 by some 8.5 billion Euros.

The catch is what would happen to investors in these bonds. The price of the bond expiring in 2014 closed at 68.15 on Friday. This is quite chilling when you consider that not only does Greece promise you 100 in May 2014 but she also has the EU/ECB/IMF backing her up. The markets are saying, we don’t believe you! An investors buying now would expect 100 in May 2014 as the capital component of the 19% redemption yield. Moving the return of the prinicipal to 2020 would accordingly be quite a punishment compared with getting it in 2014.

Flight to safety in....treasuries?...on downgrade of USA? "At least gold is doing well." As Irwin "Fletch" Fletcher said when confronted by the police chief pointing a gun at his head, "thank God, the police have arrived."